Telstra, government attacked over IBM job cuts

The Federal government and Telstra has come under heavy fire over the redepoloyment of 450 Telstra code cutting jobs to IBM India, with both the federal opposition and the Australian Computer Society accusing the government of allowing Telstra to ride roughshod over the national interest.

With IT and Communications Minister Daryl Williams on holiday, the resulting outcry over the cuts clearly caught the government unawares - with an annoyed government source confirming Canberra had no prior warning of Telstra and IBM's bombshell.

Core to the accusations are, as a partially state-owned behemoth that extracts sizeable revenues from Australian taxpayers at an artificially inflated price, Telstra should not be allowed to squeeze its suppliers to the point that they are forced to export labour offshore.

Australian Computer Society President Edward Mandla said Telstra's senior management should instead turn the spotlight onto their own jobs if they wanted to save money, adding that the size of job losses simply did not justify the amount of money saved.

"The type of money we are talking about is so minuscule compared to the bad management, bad decisions and bad investments [Telstra's] management have made. They ought to consider the impact on the community that makes them so profitable," Mandla said.

Mandla added the government needed to be able to "stand up for and promote" the Australian IT industry in order to create more jobs, adding the largest part of Australia's IT trade imbalance was caused by an "attitudinal deficit" by government that refused to back local industry development or encourage investment.

"There has been no real innovation in telecommunications in Australia since 1992 [partial deregulation] - it's not hard to see why we have a $14.4 billion [ITC] trade deficit", Mandla said.

Meanwhile, the Federal Opposition made fast meat and drink of the job cuts, with Shadow Communications Minister Lindsay Tanner accusing the government of allowing Telstra "to behave like a fully privatised monopoly, free of national interest objectives".

"The Howard Government is happy for Telstra to milk Australians with higher line rental prices while sending key IT jobs overseas," Tanner said.

Tanner went on to call on Communications Minister Daryl Williams to demand Telstra to "rethink it's disastrous decision".

"[Telstra] makes around 90 per cent of [its] profits in the Australian telecommunications sector. With the privileges of monopoly come responsibilities. For Telstra to do a deal with IBM to outsource these jobs flies in the face of the national interest," Tanner said.

A statement provided by a spokesperson for the Minister for Communications, Information Technology and the Arts (in this case acting Minister Rod Kemp) said: "Australia has much to gain from selective outsourcing of ICT services overseas, both from enhanced productivity and as a provider of high-end services." He said the matter had to be viewed in perspective.

"Telstra operates in a global environment it must remain competitive to allow it to keep offering high quality services to Australian consumers and businesses. It is a commercial matter for Telstra to determine the appropriate level and type of any outsourcing," the statement said.

The outsourcing challenge

Meta Group's Vice President for International Application Delivery Strategies Michael Barnes said that IT organisations faced a twin challenge with overseas sourcing.

"It's getting harder and harder to justify specific [localised] roles within application development from a cost perspective - but there is an absolute limit to the amount of functions that can be either outsourced or moved offshore.

"We can assume that IBM's development process is reasonably well structured. Offshore development of specific roles, particularly coding itself is going to continue. This is just a further proof point to confirm a trend," Barnes said.

However Barnes warned that organisations considering offshore development work need to ensure that they were still able to "manage the overall process".

"The key issue is the level of collaboration between the folks onshore and the folks offshore. For a lot of commercial IT organisation, they don't have the level of maturity to be able to do that yet. The onus of management responsibility is still on [the onshore side]. As far as the skills of developers in India , they are certainly comparable to what you get in most other regions."

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